And Now Back to Our Regularly Scheduled Programming

Entering this past week, there were three very large elephants in the room that needed to be addressed:

1)      Would the USMCA deal be reached?

2)      What will be results of the UK elections?

3)      Will the US and China sign a Phase One deal before tariffs go into effect on December 15^th?

We now have the answers to 2 ½ of those questions, and perhaps the markets will start paying attention to the fundamentals and technicals again, rather than the drama.  A USMCA deal was reached, Boris Johnson won the UK elections in a landslide victory, and the US and China “agreed in the text” to a trade deal which will result in the cancellation of the pending tariffs on December 15^th.  Although there is still some drama that needs to play out over the US-China trade deal (why isn’t it signed yet?), most of the uncertainty entering the week has been removed!

What does the removal of these uncertainties mean for the markets? 

It means they will once again start paying attention to what’s in our Week Ahead, rather than watching for exit polls and tweets. 

It means people might actually care that there is a hammer on the daily USD/MXN chart and that price is diverging from the RSI.  Even if this breakdown out of the long-term triangle is to hold, there is still room for the pair to bounce back up to the upward sloping trendline of the triangle near 19.3000.

Source: Tradingview, City Index

It means that although GBP/USD is pulling back a bit on the day after briefly trading above 1.3500, that traders may come in and buy on this dip and the flag pattern may play out to up near 1.3800.  The RSI is overbought near 80, so a pullback towards 1.3200 would be normal to let the RSI unwind before price heads higher.

Source: Tradingview, City Index

And it means that Gold could hold 1450, which is the 38.2% retracement level from the lows in late May to the highs in early September.  And there is still a possibility for gold to break higher out of the flag formation and head up towards the target near 1720.

Source: Tradingview, City Index

Hopefully with many of these uncertainties out of the way, the markets will return to determining prices through price discovery, rather than through headlines.